Fundraising in 2024: what B2B SaaS founders need to know

In 2021, some traction and a pipeline were all it took to see founders to the next raise. Sadly, those days are behind us. Happily, we think we’ve turned a corner from the economic challenges of the past few years. With interest rates in the UK starting to fall, and consumer sentiment improving, we’re hoping to see the impact downstream in corporates, as they think about investing in growth over the course of 2025. For B2B software founders with their wits about them, their prospects of raising funds might just be improving. Here’s what you need to know to secure investment over the rest of the year – and into next.

1. Sustainable growth, at all costs

Growth at all costs is out (it’s been well documented). What investors are looking for is sustainable growth. Capital has become more expensive and venture investors have, correspondingly, become more selective. Now, profitability (or a clear path to it) is a key factor in investment decisions. But how do you balance that with an early-stage company’s need to grow?

The answer is enhanced focus on sustainability: growth needs to happen from a solid base of unit economics, with consideration of the overall trajectory of the business. Investors will be focussing on historical and expected ARR growth, unit economics, the makeup of operational expenses (OpEx) and the cash burn relative to absolute ARR.

Going deeper, we’ll want to pull apart your retention to understand how and why customers are (or aren’t) renewing, how long renewals are taking, how your value proposition is evolving and the prospects for growth across the current customer base.

Founders who can demonstrate a strong focus on operational efficiency, high customer retention and a viable strategy for reaching profitability will stand out.

Actionable Takeaways:

• Show investors how you’re scaling without sacrificing margins. Build a model that maps out the relationship between growth, costs, and burn rate.
• When speaking to investors focus on the unit economics and explain why you’ve prioritized certain investments or cost-saving measures. Tie each decision back to long-term value creation.
• Dive deep into customer retention data, not just ARR growth. Show how you’re evolving your product to increase retention and how it reduces churn in a measurable way.

2. Focus on retention, not just acquisition

Customer retention has become as important as customer acquisition – if not more so. The benefits of net revenue retention are much discussed, and we shouldn’t disregard them, but we think that gross revenue and customer churn rates are more significant indicators for the long-term viability of a business. Net revenue retention tells us about growth, but gross revenue and customer retention tell us about survival. A founder with a strong customer retention strategy tells investors they have built a sustainable business that can weather economic uncertainty.

Actionable Takeaways:

• Incentivise your team to renew early. If you’re not on credit-card auto renewal, customers should be renewed at least three months before the contract ends (and much more if it’s a multi-year deal).
• Create a structured plan that ensures customers hit key milestones with your product post-sale and really invest in Customer Success. It’s there to support customers, not just renew them.
• Present gross retention, not just NRR, in your pitch deck. This shows you’re focused on survival and sustainability, even before you talk about growth.

3. Fundraising is an enterprise sales cycle – it’s taking much longer

If you’ve raised capital in the past, you may be surprised at how much longer the process takes today. Investors are taking their time to work out which investments are worth pursuing, and, as a result, diligence periods are more drawn-out. This means pulling apart your financials, understanding why certain customers have purchased and which budget it came from, reviewing the pipeline in detail to look at the larger opportunities line-by-line. We’ll also be looking to interview two or three customers. And all this before a Term Sheet.

Founders need to prepare themselves for longer cycles and ensure every aspect of their business is investor ready.

Actionable Takeaways:

• Make your financials, pipeline and customer metrics investor-ready at all times. Build regular updates into your operations so you’re never caught off-guard by due diligence requests.
• Prepare early, don’t wait until you’re deep in talks. Assemble detailed financials, contracts and customer case studies, ready to accelerate when the time comes.
• Proactively engage with key customers you know will speak highly of you. Make sure they are prepped and ready to be contacted by potential investors as part of the diligence process.

4. The Power of a Strong Investor-Partner Relationship

Finally, remember that investors aren’t just looking for a great product and management team—they’re looking for a long-term partnership. The most important thing founders can do is seek investors who bring more than just capital to the table. VCs can help open doors, provide strategic guidance, and assist with hiring and growth strategies, not to mention future rounds of fundraising.

Building relationships with investors who offer more than just money will be key to navigating this challenging environment – so don’t be afraid to ask them hard questions on the way in.

Actionable Takeaways:

• Vet your investors as they vet you. Build a list of questions that assess what each investor brings to the table—beyond capital. Ask about their operational expertise, network, and past successes in scaling companies like yours.
• Map out how you’ll regularly engage your investors beyond board meetings. Be proactive about tapping into their network for talent, introductions, and partnerships.

Conclusion: Navigating Fundraising Now

This year has presented a challenging, but more refined, fundraising environment for B2B software companies. Whilst the growth environment is tough, it’s important to balance trending towards profitability with investments in growth – preparing for when business sentiment improves.

The Octopus Ventures B2B Software team is focussed on backing companies with £1m+ ARR, and we’re actively looking for founders who understand the importance of operational efficiency, customer retention, and sector-specific opportunities.

If your company is preparing for its next funding round, I’d love to hear from you. Reach out to see how we can help you grow, scale, and thrive – even in uncertain times!